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We have 3 simple rules at Lexington Financial. They are safety 1st, Earn reasonable rates of return over time, and keep everything simple. Why do we believe in this? Because we know history, above all, we know what happened during the previous financial disasters! We don’t want to see people lose their retirement if we can help them avoid it.
Have you had concerns about the market? Then it’s time to reconsider your plan! The page “Knowing Your Money” will show you common retirement pitfalls. It’s never a bad idea to prepare for the worst case scenario!
Call us at 859-967-4663 to schedule a no-obligation review of your retirement plan. We also offer online booking through Calendly!
Market Snapshot, January 2025 - Aaron Stelter
The Yen Carry Trade:
Previously in a 2024 Snapshot, we discussed the Japanese Yen Carry Trade and it’s significance to market movements in the United States. From 2016 to early 2024, market participants were able to borrow tremendous sums of money from the Japanese government at negative or 0% interest rates. These funds could be converted to USD, and used to invest in assets in the U.S Stock Market.
The Japanese government has increased the interest rate from -.01 to .5 over the past year, that means large market participants are no longer able to use the Bank of Japan as a free liquidity source. We’ve already been warned about the notational value of this trade being in the hundreds of billions, as a conservative estimate, with ranges up to the trillions.
What this means is in the future, Yen Carry Traders will have to de-leverage, and sell positions to pay off debt at a loss unless a negative rate change occurs. That is unlikely given the fact that rates were raised in January of 2025.
